I spoke on the phone today with the Americas Vice President and General Manager of HP ProCurve - Karl Soderlund, and learned why HP ProCurve is dismantling Cisco's market share on a deal-by-deal basis, for instance:
If you trade-in your Cisco equipment, HP ProCurve will take 20% off its list price.
By doing so, I feel that HP ProCurve is whacking Cisco in its most vulnerable spot, its lack of pricing flexibility.
And why does Cisco lack pricing flexibility?
Well, mostly because Cisco VARs no longer have any margin left to profitably match HP ProCurve pricing on a deal-by-deal basis. Furthermore in my opinion, while Cisco salivates over 30 to 50 new market adjacencies, Cisco's loss of market share has in itself become the networking industry's newest market transition.
It appears HP ProCurve is calling the shots now, because during my conversation with Soderlund, he knowingly stated, "We’ve seen Cisco offer price-matching discounts to existing customers in order to equal ProCurve prices – and react to ProCurve’s momentum and market share gains. ProCurve wants to make all Cisco customers aware of this offer, giving every existing Cisco customer a discount, simply by contacting ProCurve to participate in the deal.
"HP ProCurve continues to win business and gain market share through increased awareness in the market. Customers and partners are becoming aware of the tremendous benefits HP ProCurve provides by offering the best value, and in this current economic climate, more companies are forced to look at alternative solutions in order to find the best innovation and best price. Those customers are re-evaluating their total cost of ownership and are turning to HP ProCurve.
"HP ProCurve is the price performance leader and has a TCO that no competitor can match. We've built our business around it. We’re currently offering VARs and end-users a variety of incentives to help them win more deals, but overall, we’re not changing anything, we’re executing on our existing strategy."
Cisco's Value-Based Approach
According to Wendy Bahr - Senior Vice President for Cisco U.S. and Canada Channels:
"Our partners embrace the value-based approach. By knowing they will be rewarded for the value they deliver to the customers, not the volume they deliver to the vendor, our partners have the confidence to build their businesses around solving customers’ toughest issues and addressing their greatest opportunities. Over the years, that value-based approach has been absolutely critical to enabling our partners to lead Cisco into a half-dozen new markets. It won’t come as any surprise that the value-based approach is also central to our moves into 30 new adjacencies, including the data center, collaboration, and energy-efficient network design."
My interpretation of the above quotes from Ms. Bahr:
In previous years, partners led Cisco into a half-dozen new markets, however, this time it's going to be Cisco itself that will lead partners into 30 new adjacencies.
Meanwhile, a ChannelWeb article appears to backup my notion that HP ProCurve is dismantling Cisco's market share on a deal-by-deal basis.
Related stories:
HP ProCurve wrestles Cisco with new tag teams
Cisco distributor says customers demanding HP ProCurve
What's your take, can Cisco VARs profitably match HP ProCurve pricing on a deal-by-deal basis?
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There are plenty of pricing
There are plenty of pricing options to assist Cisco channel partners, including trade-in programs and more.
Before you simply regurgitate one vendors' story checking the other side might provide a more balanced (read unbiased) story.
No doubt, but is it working?
No doubt, but is it working?
As Ronald McDonald so famously said:
Where's the beef?
Sincerely,
Brad Reese
BradReese.Com Cisco Refurbished
Cisco is no meal ticket
I am a Cisco partner, you make no margin other than 2 to 3 points it that. Everyone gets the close to the same pricing and the small partners lose to the large partners all of the time.
Cisco is no meal ticket.
Where's the beef? You claim
Where's the beef?
You claim that the core to Cisco losing share to ProCurve is Cisco's pricing inflexibility. Yet, there are plenty of pricing options for partners. This suggests that your assumption is false.
Let's consider other reasons, for example that ProCurve is attempting to turn the market it plays in to a commodity market. This will lead to little value for anyone selling into this market whether a vendor or a VAR as margins are squeezed further.
I see Cisco's moves into 'market adjacencies' as a way to continue to find non-commodity markets to play in and therefore continue to provide value for its VARs.
What would you consider to be a commodity margin?
Interesting, what would you consider to be a commodity margin, how many points?
Sincerely,
Brad Reese
BradReese.Com Cisco Refurbished
I think your question misses
I think your question misses the point.
We see markets - across industries, but particularly IT - become commoditized time and time again. This is not a bad thing because customers win as once-expensive technology moves through the market and becomes cheap enough, for example, for small businesses and consumers to use.
While some will make money in such markets it does become a much more difficult place to make money when a technology or product set becomes a commodity. I am sure you would agree with this.
Cisco continues to evolve its solutions set and provide value to VARs through numerous pricing options and programs as well as offering products in adjacent markets. As Jeff Bezos of Amazon.com was recently quoted as saying "what's very dangerous is not to evolve".
Cisco continues to
So if I understand you correctly
So if I understand you correctly, Cisco has given its blessing as well as permission, so that HP ProCurve may gain market share from Cisco.
Why? Because Cisco is evolving away from commoditized products!
What an interesting strategy, Cisco's new evolution calls for it to buy Flip video for $747 million, thereby allowing Cisco to avoid commoditized products that sell in mass retail discount outlets such as Wal-Mart.
And all for the purpose of creating new, abundant and robust "value propositions" for the Cisco VAR channel.
Gee, I've got to admit, I'm a real dummy for not understanding this!
Brad Reese
BradReese.Com Cisco Refurbished
You're not a dummy but you
You're not a dummy but you do lack proper research.
I recall comments from Cisco execs on a number of occasions since Cisco purchased Pure Digital (the maker of the Flip) saying that they were interested not in the products itself but in the underlying technology (I think one journalist suggested the software).
So you see, the Pure Digital purchase is not about a commodity product.
To license Pure Digital's technology in perpetuity
How naive of me not to do the proper research, I get it now, Cisco spent a wise and meager $747 million to license Pure Digital's technology in perpetuity.
Now that's sharp!
Brad Reese
BradReese.Com Cisco Refurbished
Don't compare Procurve with Catalyst
Hi Brad,
I am a sales engineer working in a channel partner for both HP and Cisco.
I don't see how we can compare HP procurve pricing to Cisco catalysts. Granted, procurve switch hardware is equally rugged and highly reliable as its catalyst counterparts.
However, I have found numerous software feature limitations with procurve, when compared to the catalyst family. Most of my enterprise clients also know that, for which reason they wouldn't compromise on features and functionality for pricing.
What you pay is what you get.
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